Europe's 'Worst Crisis' Requires Fiscal Union: Spain

Europe needs a fiscal and banking union if it is to survive “the worst crisis” since the European Union’s creation, Spanish Prime Minister Mariano Rajoy said in an open letter to leaders on Wednesday.

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In the letter, which was addressed to Jose Manuel Barroso, president of the European Commission and Herman Van Rompuy, president of the European Council, Rajoy said fiscal and banking union, as well as monetary union, will be necessary to counter financial volatility and restore confidence in the euro zone.

“We must create a European fiscal authority that can direct fiscal policies in the euro zone, that can harmonize member states’ fiscal policies, and that can control central finances, as well as manage European debt ,” Rajoy wrote.

Rajoy added that the European Council’s next meeting on June 28-29 provides an “urgent” opportunity to outline these plans, and that leaders must sent a “clear and determined” message about the irrevocability of the euro and the common market.

“The euro is on a path of no return, and its connection with the entire European project, starting with the common market, is indissolvable,” said Rajoy in the letter.

Also on Wednesday, Vitor Constancio, vice president of the European Central Bank , told CNBC that a euro exit by any member state would be “catastrophic”.

“I cannot imagine a country leaving the euro and surviving; for that country in particular, it would be catastrophic,” Constancio said.